Cheaper, US Retail Sales Beat, Middle East Tensions Remain A Focus

ACGBs (YM -2.0 & XM -3.5) are cheaper after stronger than expected Retail Sales elicited a broad sell off in US tsys. The US tsy curve bear-steepened, with yields 2-9bps higher. The 2Y yield was +2.4bps at 4.920%, 10Y +8bp to 4.601%, while the 2y10y was +2.593 at -32.120.

• Ex-Auto Retail Sales rose 1.0% compared to 0.3% est, and February was revised 0.2pp higher to 0.5%. The control group, which feeds into GDP, was even stronger at 1.1% m/m. The data suggest that consumer spending was stronger than realised in Q1 and that there is solid momentum into Q2.
• US equities finished with significant declines led by tech. Equities opened in the green on a relief trade after Israel repulsed the well-advertised attack from Iran on Sunday. But equities weakened sharply and extended last week's declines amid the rise in yields. Additionally, investor concerns were intensified as Israel threatened retaliation.
• Cash ACGBs are 2-4bps cheaper, with the AU-US 10-year yield differential unchanged at -31bps.
• Swap rates are 1-3bps higher.
• The bills strip has bear-steepened, with pricing -1 to -4.
• RBA-dated OIS pricing is slightly firmer. A cumulative 19bps of easing is priced by year-end.
• The highlight of this week’s local calendar is the Employment Report for March on Thursday. The calendar is light until then.